UMCA Managing Director's contract

Note: The UMCA members were denied the repeated requests to see the Managing Director's (only paid employee of the UMCA) contract in the past year. The Managing Director's contract was public when it was signed within months after the UMCA became a non-profit organization. Fortunately, Seana Hogan has the hard copy from the time when the contract was made public. We may not be as lucky when his current contract expires on December 31, 2007 because we likely won't be allowed to see the new one. Not allowing access to the Managing Director's contract is in violation of UMCA's Bylaws.

I have been reading the UMCA's contract with its managing director. To me it seemed that the UMCA had delegated too much to the managing director. The Board would be ill prepared to carry on without him in the case that he suddenly resigned; and I was uncomfortable with the principle of putting so much authority in the hands of an individual - especially one that publicly eschews the bureaucratic process. Anyhow, I asked an attorney friend of mine to look it over. He was kind enough to return a version with his comments (and I added mine, too); and he drafted an alternative contract, which he thinks would put the UMCA in a more secure position. The two contracts are below. What do you think?

AGREEMENT made DATE between the UltraMarathon Cycling Association Inc. ("UMCA") and John L. Hughes, Managing Director of the UMCA, Inc. ("Hughes").

Recitals

John Hughes is engaged in the business of managing programs for the UMCA and publishing UltraCycling magazine and has in the past managed programs and published the magazine for the UMCA. The UMCA desires to employ Hughes to continue to manage UMCA programs and publish UMCA publications in the future.

Agreement

I. UMCA Director. The UMCA has the right to appoint the Managing Director of the UMCA and to determine the term of any such appointment. The UMCA hereby confirms the appointment of John Hughes as the Managing Director of the UMCA and an employee of the UMCA, for a term ending on December 31, 2007. The UMCA bestows on Hughes all the rights of an employee. Hughes accepts this appointment. This term may be extended by mutual consent of the parties.

[Attorney: THIS IS AN EXCESSIVELY LONG TERM FOR AN EMPLOYMENT CONTRACT]

II. Reporting. As specified in the By-laws of the UMCA the Managing Director reports to the President of the Board.

[Seana: This is not the way I see it working in practice. Even the current BoD president, by his own admission, does not know all the details of the UMCA purchase of the Race Across America, for example.]

III. Managing Director's Responsibilities. As specified in the By-laws of the UMCA, the UMCA hereby delegates to Hughes full authority to carry out the following assignments:

[Attorney: THE BOARD SHOULD ALWAYS RETAIN ULTIMATE CONTROL, EVEN IF ASSIGNING DUTIES TO AN EMPLOYEE; THIS APPEARS TO BE A COMPLETE ABDICATION OF RESPONSIBILITY, WHICH A BOARD SHOULD NOT DO]

[Seana: Where are the checks and balances that any non-profit organization should have?][Attorney: AGAIN, THE BOARD SHOULD RETAIN CONTROL]

The UMCA and Hughes further agree that the Hughes has final editorial responsibility for the newsletter and the website.

[Seana: Why should one person be the have full control over the organization's communications policy? I just don't see how this serves the UMCA, its members, or the sport?][Attorney: SAME COMMENT - THE UMCA IS LIABLE FOR WHAT IS PRINTED, SO THE BOARD SHOULD RETAIN CONTROL]

2) The Managing Director operates UMCA programs within the policies established by the Board including defining and operating the John Marino Competition and UMCA Mileage Challenge and sanctioning record attempts. The Managing Director establishes rules for these programs and appoints and supervises staff to manage each program.

[Attorney: THE MD SHOULD RECOMMEND AND IMPLEMENT RULES AND POLICIES, NOT HAVE SOLE AUTHORITY]

3) The Managing Director sanctions the Race Across America ("RAAM") and selects and sanctions the RAAM qualifiers.

[Seana: Who does it serve to give the MD exclusive right to determine RAAM qualification?][Attorney: SAME AS MY PREVIOUS COMMENT]

4) In accordance with policies established by the Board, the Managing Director manages the finances of the UMCA including collecting the dues and paying the expenses. The Managing Director prepares an annual budget and an annual financial report for submission to the Board of Directors.

[Seana: Here the MD appears to be in rather serious breach of his contract, having failed to deliver 2005 and 2006 financial reports][Attorney: THE BOARD SHOULD FOLLOW THROUGH TO ENSURE THESE DUTIES ARE PERFORMED]

5) The Managing Director prepares an annual report to the UMCA members on the programs and finances of the UMCA.

[Seana: Again the MD appears to be in rather serious breach of his contract, having failed to deliver this report since 2004][Attorney: SAME AS MY PREVIOUS COMMENT]

The UMCA delegates to Hughes these assignments. Such delegation shall provide Hughes with the full authority to act in his best judgment in carrying out these assignments. Hughes agrees to carry out these assignments. Hughes may appoint and supervise UMCA officers and staff to assist him in carrying out these assignments.

IV. Compensation. In return for providing the services in "III. Responsibilities", the UMCA will compensate Hughes as follows:

1) In 2003 Hughes' work carrying out these assignments will take approximately 60% of a full-time employee ("FTE" ). The UMCA shall pay the Hughes a salary of $1,500.00 / month, to be paid on the first of each month.

[Seana: I have to wonder, with a more active board, if the UMCA would be able to do what RUSA does, in sanctioning a greater volume of events, and producing a better looking magazine, all without paying any staff salaries]

2) For 2004 and beyond the Board of Directors shall review the Managing Director's responsibilities, the FTE and determine an appropriate salary.

[Seana: I am not aware of any 'job reviews' of the current MD, but his salary has risen to $25,000 a year. I think we need a clear report from the BoD to justify the salary increase]

V. Clothing and commemoratives. The UMCA owns the names "UltraMarathon Cycling Association," "UMCA" and "UltraCycling." and the logo of the UMCA. The UMCA hereby confirms that it has granted to Hughes the exclusive right to produce for sale clothing and other commemorative items bearing the UMCA trade name(s). Hughes is responsible for all expenses associated with producing clothing and commemoratives and will retain any profits from sale of clothing and commemoratives.

[Seana: I never knew! I always thought the profits of jersey sales and other UMCA merchandise went to the organization! I cannot think of any other non-profit that permits its paid employee to commercially exploit the name, trademark, logo and goodwill of the organization in this manner. I am shocked. This should be clearly stated on the UMCA website, wherever the jerseys, etc. are advertised.][Attorney: DEPENDING UPON THE ACTUAL INCOME FROM THESE ACTIVITIES,THIS COULD RESULT IN THE IRS FINDING THAT THE COMPENSATION IS NOT REASONABLE FOR A NON-PROFIT OR THAT THERE IS PRIVATE INUREMENT; IN ANY EVENT, IT APPEARS TO BE A BAD BUSINESS DECISION FOR THE UMCA AND LIKELY MISLEADING TO MEMBERS WHO PURCHASE THE GOODS, WHO ARE LIKELY BELIEVING THAT PROCEEDS GO TO THE UMCA, NOT ONE INDIVIDUAL; LIKELY, SOMEONE ELSE MIGHT MARKET THE GOODS AND THE UMCA WOULD GET SOMETHING OUT OF IT]

VI. Back issues. The UMCA hereby confirms that it has granted to Hughes ownership of all issues of UltraCycling magazine not distributed to the membership ("back issues"). Hughes owns all back issues produced during his prior term as Director (January 1, 1998 to December 31, 2002). Further, Hughes will take ownership of any additional back issues produced between January 1, 2003 and December 31, 2007. Hughes will retain any income from sale of these back issues.

[Seana: This is scandalous! This must be the reason the UMCA does not publish a PDF version of its newsletter for archival reference on its website! This means that the UMCA members are deprived of easy access to back issues because that would deprive the Managing Director of extra income. I don't see how that serves the interests of the membership.The UltraCycling magazine is paid for by the membership, surely it should belong to the membership?][Attorney:SAME COMMENTS AS ABOVE; THIS IS FAR TOO LOPSIDED IN FAVOR OF THE EMPLOYEE]

VII. Intellectual property. The UMCA and Hughes have agreed that the UMCA holds the copyright on all material edited and published by the Managing Director including but not limited to UltraCycling magazine and ultracycling.com from January 1, 1998 through December 31, 2007. However, John Hughes retains copyright on any material of which he is the author or co-author.

[Seana: What is the point of the UMCA holding any copyright if the Managing Director is the one that profits from the sales of back issues? This really is extraordinary.][Attorney: AS A PAID EMPLOYEE, EVERTHING THE EMPLOYEE AUTHORS WHILE EMPLOYED, RELATED TO THE EMPLOYMENT, IS A "WORK FOR HIRE," AND COPYRIGHT SHOULD BELONG TO THE EMPLOYER]

VIII. Advertising. The UMCA hereby confirms that it has granted to Hughes two full pages (or four half-pages) for advertising in each issue of UltraCycling magazine at no cost to Hughes.

[Seana: This looks like a conflict of interest to me. So much of what the UMCA does seems to be for the benefit of the Managing Director. It just does not seem right to me.][Attorney: ADDITIONAL COMPENSATION TO THE EMPLOYEE THAT NEEDS TO MEET THE REASONABLENESS TEST AS WELL]

IX. Liability. Hughes shall not be personally liable for the debts, liabilities or other obligations of the UMCA. Hughes shall be indemnified by the corporation to the fullest extent permissible under the laws of this state. Hughes shall be insured by Directors and Officers liability insurance provided by the UMCA.

[Seana: I am not comfortable with this, either. As we learned recently, the UMCA did not even have this kind of insurance, to protect ALL of the Board members, until February of 2007, when those campaigning for BoD seats demanded it. I am not sure who is responsible for the neglect of this insurance provision].[Attorney:THIS IS TYPICAL, BUT DEMONSTRATES WHY THE BOARD SHOULD RETAIN CONTROL; IT'S NOT REASONABLE TO GIVE HIM UNLIMITED AUTHORITY TO ACT AND ALSO PAY FOR INSURING HIM]

X. Termination for Cause. "Termination for Cause" shall mean termination of employee's employment by the UMCA by reason of the following: (I) Employee's willful dishonesty towards, fraud upon, crime against, deliberate or attempted injury or bad faith action with respect to the UMCA; or (ii) Employee's conviction for any felony crime (whether in connection with the UMCA's affairs or otherwise). In the event of termination without cause, the UMCA shall pay to Hughes an amount equal to 12 months at the current year's salary. Further, the UMCA will grant to Hughes for a term of three years two full pages (or four half-pages) for advertising in each issue of UltraCycling magazine at no cost to Hughes.

[Seana: Cat Berge is quite clear that the Managing Director lied to her when she asked about anything in the pipeline that might be drawing RAAM and the UMCA closer together. She has it in writing. That, to me, would seem to qualify as willful dishonesty towards the UMCA][Attorney:TERMINATION FOR CAUSE IS TOO LIMITED - NEEDS TO INCLUDE FAILURE TO PERFORM DUTIES OR FOLLOW BOARD POLICIES; TERMINATION WITHOUT CAUSE COMPENSATION SHOULD NOT EXTEND BEYOND THE CONTRACT TERM]

XI. Force Majeure. Except with respect to the payment of money, neither party shall be liable for failure to perform or any delay in performing with respect to any work under this Agreement to the extent performance in the customary manner shall be prevented, hindered, or delayed in whole or in part by transportation conditions, strikes, riots, war, earthquakes, floods, compliance with an act or request of a governmental authority or persons purporting to act as a governmental authority, labor difficulty, or by interruption of sources of supply or transportation, or any other event which is not reasonably within the party's control and which the party is not able to overcome by the exercise of reasonable measures. In the event that any such event shall delay performance by a party, then this Agreement shall be extended by the length of such delay.

XII. Assignment. This Agreement is for the services of the Hughes and may not be assigned or transferred, directly or indirectly, without the express prior written consent of the Board President, provided that Hughes may assign this Agreement, in whole or in part, to any staff member, firm, corporation, or other legal entity over which he exercises control.

[Attorney: EMPLOYEE OBLIGATIONS ARE ALMOST NEVER ASSIGNABLE]

XIII. Entire Agreement; Governing Law. This Agreement embodies the entire understanding between the parties with respect to the subject matter hereof, supersedes any and all prior understandings, negotiations and communications between the parties and shall be governed by and construed in accordance with the laws of the State of Colorado without regard to its choice of laws principles.

[Attorney: OVER ALL, THIS IS AN EXTREMELY ONE SIDED CONTRACT; I'VE NEVER SEEN ANYTHING LIKE IT; IT'S AS IF THE EMPLOYEE WROTE OUT HIS IDEAL VERSION OF THE CONTRACT, THEN THE BOARD APPROVED IT WITHOUT FULLY REALIZING THE IMPLICATIONS OF THE CONTRACT. I CANNOT BELIEVE THEY HAD LEGAL ADVICE.

PRIMARILY, THERE IS FAR TOO MUCH DELEGATION OF AUTHORITY WITHOUT THE BOARD RETAINING ULTIMATE CONTROL; IT ALMOST APPEARS THAT THE INCORPORATION WAS A COMPLETE SHAM, AND THE UMCA REMAINS SOLELY RUN BY HUGHES; THERE IS LITTLE TO NO RECOGNITION OF BOARD POWER AND AUTHORITY IN NEARLY EVERY DETAIL OF UMCA BUSINESS.

IT IS A BUSINESS DECISION, SUBJECT TO IRS REASONABLENESS RULES, AS TO WHAT COMPENSATION TO GRANT THE EMPLOYEE/MANAGING DIRECTOR; HOWEVER, THESE TERMS APPEAR TO BE EXCESSIVE COMPARED TO WHAT MIGHT BE NEEDED TO HIRE SOMEONE OTHER THAN HUGHES, AND TYPICALLY MARKETING RIGHTS WOULD INVOLVE A SHARING OF REVENUE, NOT A TOTAL PAYMENT TO THE EMPLOYEE]

What My Friend Suggested As a More Suitable Contract AGREEMENT made ___________ between the UltraMarathon Cycling Association Inc. ("UMCA") and John L. Hughes, employee ("Employee").

I. Employee/UMCA Director. The UMCA hires Employee as the Managing Director of the UMCA and an employee of the UMCA. The term of this Agreement shall be for 12 months from the date it is executed by all parties, unless sooner terminated pursuant to the terms of this Agreement. Employee accepts this appointment. This term may be extended by written consent of the UMCA Board of Directors ("Board") and Employee.

II. Reporting. The Managing Director reports to the Board via the President of the Board.

III. Managing Director's Responsibilities. The Managing Director shall, under the supervision of the Board, be primarily responsible for the following duties, any or all of which may be modified by the Board at any time:1) Publish the newsletter, including recommendations for editorial policy to the Board, implementing policies set by the Board, and selecting and supervising contributing editors and writers; maintain the website, including selecting editorial content, and appoint and supervise webmasters, all at the direction and supervision of the Board. The Board has final editorial responsibility for the newsletter and the website.2) The Managing Director operates UMCA programs within the policies established by the Board, including operating the John Marino Competition and UMCA Mileage Challenge and sanctioning record attempts. The Managing Director recommends to the Board rules for these programs and appoints and supervises staff or volunteers to manage each program.3) The Managing Director implements policy set by the Board in sanctioning the Race Across America ("RAAM") and selecting and sanctioning the RAAM qualifiers.4) In accordance with policies established by the Board, the Managing Director manages the finances of the UMCA, including collecting the dues and paying the expenses. The Managing Director prepares an annual budget and an annual financial report for submission to the Board.5) The Managing Director prepares an annual report to the UMCA members on the programs and finances of the UMCA.

IV. Compensation. The UMCA will compensate the Managing Director as follows:1) In 2003 the Managing Director's work carrying out these assignments will take approximately 60% of a full-time employee ("FTE" ). The UMCA shall pay the Managing Director a salary of $1,500.00/month, to be paid on the first of each month.2) For 2004 and beyond the Board shall review the Managing Director's responsibilities, the FTE and determine an appropriate salary.

V. Intellectual property. The UMCA holds the copyright on all material edited and published by the Managing Director including but not limited to UltraCycling magazine and ultracycling.com from January 1, 1998 through December 31, 2007. However, the Managing Director retains copyright on any material of which he is the author or co-author.

VI. Advertising. The UMCA hereby confirms that it has granted to the Managing Director two full pages (or four half-pages) for advertising in each issue of UltraCycling magazine at no cost to the Managing Director.

VII. Liability. The Managing Director shall not be personally liable for the debts, liabilities or other obligations of the UMCA. The Managing Director shall be indemnified by the corporation to the fullest extent permissible under the laws of this state for legal obligations of the UMCA. The Managing Director shall be insured by Directors and Officers liability insurance provided by the UMCA.

VIII. Termination for Cause. "Termination for Cause" shall mean termination of employee's employment by the UMCA by reason of the following: (i) willful dishonesty towards, fraud upon, crime against, deliberate or attempted injury or bad faith action with respect to the UMCA or its members; or (ii) conviction for any felony crime (whether in connection with the UMCA's affairs or otherwise); or (iii) willful failure to carry out the policies of the Board or assigned duties. In the event of termination without cause, the UMCA shall pay to the Managing Director the lesser of an amount equal to 12 months at the current year's salary or balance of salary due until this Agreement would expire.

IX. Force Majeure. Except with respect to the payment of money, neither party shall be liable for failure to perform or any delay in performing with respect to any work under this Agreement to the extent performance in the customary manner shall be prevented, hindered, or delayed in whole or in part by transportation conditions, strikes, riots, war, earthquakes, floods, compliance with an act or request of a governmental authority or persons purporting to act as a governmental authority, labor difficulty, or by interruption of sources of supply or transportation, or any other event which is not reasonably within the party's control and which the party is not able to overcome by the exercise of reasonable measures. In the event that any such event shall delay performance by a party, then this Agreement shall be extended by the length of such delay.

X. Assignment. This Agreement is for the services of the Managing Director and may not be assigned or transferred, directly or indirectly, without the express prior written consent of the Board.

XI. Entire Agreement; Governing Law. This Agreement embodies the entire understanding between the parties with respect to the subject matter hereof, supersedes any and all prior understandings, negotiations and communications between the parties and shall be governed by and construed in accordance with the laws of the State of Colorado without regard to its choice of laws principles.